Laws that mandate quotas don’t guarantee that boards will benefit from diversity.

[Illustration: paitoonpati/iStock]

By Kiersten Barnet3 minute Read

We are at a historical moment where tides can turn quickly to create meaningful, systemic change towards how women are welcomed and represented in the world of business.

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California recently passed a mandate requiring public companies that are incorporated in the state to have at least one female director by the end of 2019. It’s the first statewide ruling of its kind, designed to address the small and stagnant representation of women in U.S. boardrooms. The value of diversity in leadership roles across organizations and sectors is significant and research-backed. Yet quotas should also be regarded with a critical eye to ensure programs that support women in business are doing so in the most responsible way possible.

Through my work with the U.S. chapter of the 30% Club, I’ve learned that while it’s hard to argue against the value of women on boards, how a company gets there can be controversial and raise several questions.

Most notably, there is the question of whether quotas lead to the desired outcome of better gender balance throughout company ranks. Past government regulations, like Norway’s government-mandated quotas beginning in 2008, have shown that while they may increase the number of women on boards, there is no substantive evidence that shows quotas as a catalyst for systemic change across companies.

In Norway’s example, the percentage of women in C-suite and senior leadership positions has not risen in tandem. On a larger scale, mandated regulations for diversity and inclusion risk causing complacency across private firms tempted to check a box, instead of taking an opportunity to be leaders in driving wide-reaching change.

Accelerating gender diversity at the board level requires a strong commitment from multiple stakeholders. Governments must be cautious when implementing regulations without partnering with the private sector to support them. The U.S. 30% Club members include the CEOs of public and private companies, executive search firms and the three largest asset managers with a combined $14 trillion assets under management (AUM). These business leaders are all in positions with the power to affect meaningful change in their own way. Through collective, voluntary actions, the public members have moved the needle in their own boardrooms at a pace far exceeding that of the S&P 500. In June, they celebrated crossing the 30% threshold, up from 21% five years ago. This is a testament to what business leaders can do when they buy into desired change.

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The other common concern surrounding quotas is whether there are enough qualified women to fill these board seats. This “pipeline issue” is a popular misconception that is easily disproven. In 2016, the U.S. 30% Club and Equilar partnered on a study that found that 78.5% of female officers at listed U.S. companies have yet to sit on a public board. This overwhelming evidence indicated that the gender gap in public boards is not a result of lack of supply, but rather a question of how that supply is positioned in traditionally male-dominated networks.

The 30% Club’s Future Female Directors program works to address this concern. CEOs directly contribute to the pool of qualified female candidates by personally endorsing women from their firms and increasing their exposure to board networks and executive search firms. Getting suitable candidates in front of companies and presenting nominating committees with diverse slates of candidates increases the likelihood of a female board appointment and, in the process, helps dispel this persistent pipeline myth.

Programs like these can ensure companies are aware of the array of options open to them when selecting board members and also know how to better prepare women to take on these roles. Through voluntary efforts like the 30% Club, it is clear that the private sector is taking steps to acknowledge the obvious fact that women should be better represented in all parts of a business, including the boardroom. And while the California quota is a well-intended tool to increase female boardroom representation, it can’t be the only lever. If implemented responsibly, and in a way that compliments business-led programs and elevates the cultural dialogue, we can collectively harness the power to accomplish real change.

Kiersten Barnet is the steering committee chair of the U.S. 30% Club, a group of business leaders who are committed to better gender balance at all levels of their organizations through voluntary actions.